The pandemic has become a touchstone moment in our lives. It has not only accelerated years of gradual change into merely a matter of a few weeks but has also led to a dramatic shift in shopping trends worldwide. We have established that convenience and speed are now essential components that drive customer needs. However, the market has rebounded and is back on its upward trajectory. A 2023 forecast shows that revenues are expected to increase 5.48 percent to hit just over $1.8 trillion.Even today, given the convenience of online shopping and straightforward return processes that allow consumers to buy, try and return garments at no cost, the global apparel revenue in 2022 represents a 10.59 percent increase year-on-year. This growth comes after an 11.8 percent tumble – the most significant annual decrease between 2013 and 2026 due to the Covid19 pandemic. With the exception of in-store fitting rooms to try before purchasing, this growth will coincide with a swell in the percentage of returned goods, which is why the question of how to reduce returns in e-commerce is hugely relevant right now.
Addressing the Achilles Heel
No-cost shipping and next-day delivery are the stars of modern retail. However, an old nemesis lurks in the background: product returns. These returns are getting renewed attention amid a surge in online shopping and heightened demand for sustainable retail practices. The rate of returns has increased, which has cost implications for fashion businesses. In the wake of this, they remain a crucial tactic to woo customers, with these policies encouraging consumers to try out products they might otherwise hesitate to buy.
As a specific example, during the holiday season, millions of people shop for the sole purpose of giving. Unfortunately, a large number of those gifts are returned. The USPS even refers to January 2nd as “Peak Returns Day” because they see a significant increase in returns yearly. Given this trend, brands expect some returns in January, which will almost certainly be from customers outside one’s core audience. It will not be a surprise if we factor these returns into the holiday season projections. It is usually not worth spending much money or time battling holiday returns.
Harsha Razdan, a partner at KPMG India, as well as the head of its consumer and internet business, explains the finer details of the boom in e-commerce sales. He points out that consumers are entitled to make purchases based on impulse, leading to an increase in returns – “Industry estimates indicate the current return rate for e-commerce channels in the festival period to be approximately 20 percent. Managing returns involves complex operational challenges, including customer expectations, reverse logistics, process ownership, and data limitations.”
Customer trust and loyalty are essential pillars that need to be strengthened via these interactions, and they, in turn, generate repeat purchases. However, the fashion industry is the world’s second-largest polluter behind the oil industry.
This is because beyond the economic impact, there is also wastage – plastic, delivery material, and fuel consumption. Approximately one truckload of clothing is sent to a landfill every second, with returned stock making up a significant portion. However, despite the focus on growth and consumer-centric strategies, in the face of these rising returns from buoyant online buying, retailers are now looking at fresh ways to keep customers happy while keeping costs in check.
Hassle-free returns have been part of the in-store experience for a long time. However, free returns in e-commerce had been introduced as a tactic to get consumers comfortable with the experience of shopping online in sync with the in-store experience, and garner more customers. But, by learning how to address the leading cause of returns or dissatisfaction among shoppers, businesses can aim to eliminate financial and environmental costs.
The first step in lowering the rate of return is understanding why people return products. Customers frequently purchase a product to replace it. They may buy multiple products from stores and competitors to compare the differences. Customers at stores make large purchases, only to have half of the items returned in the mail a week or two later. It is no surprise that 41 percent of customers have purchased multiple items intending to return some of them, and this behavior cannot be held against customers. It is the only way to avoid the risks of online shopping.
Understanding the consumer psyche
It is a sad reality that customers frequently purchase the incorrect size and then return the product, especially in the apparel industry. It is human tendency to believe that they know a lot more than they do. As a result, when customers buy products, they may make incorrect assumptions. They are more likely to return it if it is unfamiliar to them. In these cases, the best course of action is to assist the customer seamlessly in returning their item, leaving them with a favorable impression of the company.
But where do these customers stand in this supply chain?
Customers have no option but to rely solely on the description, product photos, and reviewers when purchasing a product online. Typically, they look to these as the go-to source for understanding the product’s purpose. They may feel cheated enough to return the product if the descriptions are not comprehensive. The brands may choose as many high-quality photos or videos as possible, but showcasing the product in its best setting still becomes challenging.
Bracketing and Wardrobing
While fashion businesses mention all the correct product information on their channels, ‘it doesn’t fit right’, or ‘doesn’t look good’ are norms regarding customer dissatisfaction and returns. However, there is a peculiar practice noticed in consumers while shopping, and that is – Bracketing and Wardrobing. As per Statista, 48 percent of consumers bracket when the sizing options are unclear. Thirty-six percent of consumers bracket when they cannot try the clothing in a physical store. Twenty-six percent bracket simply because they are unfamiliar with the brand. Furthermore, 23 percent bracket to find the right size after weight gain or loss. Customers’ homes became substitutes for fitting rooms as they shopped online more during the pandemic, exacerbating the problem. Wardrobing is another cause of concern when it comes to high return rates.
Another rampant activity occurring among teens is that they love what is buying in trend, only to use it a couple of times with the tags intact and return the item once they are done. Diesel tackled such a similar issue in its 2019 campaign. Premium brands come with an attached prestige value, and a rise in impressionable young consumers has given rise to wanting to purchase the product but also taking advantage of the brand’s return policies.
Consequently, bracketing and wardrobing increases the number of items returning to inventory while decreasing the capacity to hold other stock. These free returns are costly for businesses, and as a result, the company requires more labor and space, with no guarantee that returned items can be resold. According to a Narvar study published in November last year, 58 percent of consumers buy more goods online than they intend to, and then become a liability on these brands through bracketing.
The OG of Bracketing
There are certain examples of businesses that encouraged this behavior early on during the infancy of e-commerce. Zappos emerged as a fledgling online shoe provider in 1999, and it all started with bracketing. The concept for Zappos arose in 1998. Founder Nick Swinmurn was in a San Francisco mall looking for shoes. While one store had the style he desired, it lacked the appropriate color. The color was available in another store, but not the size. Nick spent an hour wandering the mall looking for shoes before returning home disappointed and empty-handed. The hunt for the perfect shoes continued in brick-and-mortar stores, malls, and other locations until Nick became so frustrated that he decided to quit his day job and launch an online shoe retailer (which was initially called Shoesite.com). Zappos became the original bracketing retailer. With a 365-day return policy, they encourage customers to purchase as many shoes as they want, try them all on, and only keep the ones that fit. With a return rate of 35 percent, you’d think that this would see the retailer losing money. But such wasn’t the case. “We don’t look at returns as an expense; we look at it as an investment in company service, and it helps with customer retention,” explained Sean Kim, Zappos’ director of business development, in a 2008 interview. “We encourage customers who call our customer service center to order two or three sizes and return the ones that don’t fit—and all return shipping is free for our customers.” Unsurprisingly, now, 75 percent of Zappos recurring revenue comes from repeat buyers, most of whom are bracketing while they’re shoe shopping.
The silver lining
Can bracketing be considered a boon?
Taking the assumption that customers trust your service. They have had the experience to be confident in your returns system, and, thus, choose you over visiting a brick-and-mortar store. As a result of this, though, if you notice that a lot of your customers are returning multiple items from their orders, you can grab this opportunity to create systems to help customers return their items promptly.
This could mean:
- Pre-empting returns when a customer orders a high number of items and include return labels in the box.
- Send an automated email to customers with instructions on how to return items once they receive their order.
- Have a straightforward returns FAQ section on your website or accessible via a self-service system.
This will help you process the returned items as quickly as possible. Once received in their original form, these items can be resold at the actual/original price rather than having to sell them as pre-owned, out-of-box, or refurbished — all of which cut into company margins.
Breaking the cycle of unending returns
In the apparel industry, changes in how consumers interact with retailers and make purchasing decisions increase the volume of products returned to the seller. The growth of online channels and lenient return policies have reinforced consumers’ treatment of purchases as risk-free discoveries for size and style and not just as the end-of-shopping journeys. But is there a way to eliminate
The solution: managing returns efficiently. Return management now includes a range of capabilities. It is now an accepted fact that high retail returns are inevitable, but better management will result in reduced costs and improved consumer loyalty. Initiatives planned in advance can help retailers gauge the impact of returns in a consumer-friendly way, as well as the fundamental operating model and structural changes that will enable them. Nevertheless, managing returns does come with a complex set of operational challenges, including consumer expectations, reverse logistics, process ownership, and data limitations.
To streamline the process and reduce the implications of returns, though, retailers are increasingly exploring new approaches to returns. This includes turning to external tech-help, offering more options for returns, and trying to prevent returns in the first place through new services like virtual fitting rooms.
The real losers
The financial impact of returns at the cost of expanding the business affects most retailers significantly on smaller businesses. Small business owners lament the instances of delayed credit despite delivery confirmations by the logistics team, items damaged in transit, and counterclaims – all of this can become cumbersome for small business owners to handle, along with trying to keep their business afloat.
There are also instances where customers play truant and intentionally damage the product to obtain refunds. This can cause significant losses to small to mid-level companies. On marketplaces, small businesses tend to use affordable self-shipping options, which make them vulnerable in terms of logistics hassles and inefficiencies, customer dissatisfaction, and fraud.
All this and more can be attributed to the easy going return policies online. Many retailers believe that lenient return policies are vital to maintaining loyalty and keeping the customers returning for more purchases. It is safe to say that consumers have become accustomed to the freedom offered by simple and free returns that, in turn, lead to something known as bracket shopping – wherein the customers may buy more than one size of a particular product. This phenomenon has intensified during the pandemic, when in-store shopping was on pause, and caused a lot of small- and mid-sized apparel brands to go under.
Looking beyond logistics
Online retailers have a higher return rate than their “brick and mortar” counterparts, with an average 9 percent return rate. With such a high return rate, it’s no surprise that reducing returns in the eCommerce world is a hot topic. There is also a significant increase in the cost of returned clothing. Clothing returns take about three times as long to inspect. This additional labor cost is borne by both the eRetailer and the order fulfillment warehouse. Clothing returned with marks or residue from the consumer trying on the item is considered damaged and unsellable. eRetailers are leveraging advancements in A.I. technology to combat apparel’s share of the $206 billion returns industry.
To understand this phenomenon better, here are some statistics –
- Thirty-six percent of consumers in the U.S. bracket a purchase simply because they cannot try on the clothing.
- Fifty-eight percent of U.S. consumers order multiple items in different sizes and colors, intending to return the ones that don’t fit.
- Forty percent of consumers occasionally bracket.
- During the holidays, bracketing occurs in almost 58 percent of apparel purchases.
- Fifteen percent of apparel returns annually are directly related to bracketing.
- More than $30 billion in bracketed goods will be returned this holiday season.
- As much as 50 percent of returned bracketed goods are not re-sellable to consumers.
- Adding sizing apps can reduce bracketing by up to 24 percent.
Possible solutions to reduce this impact of bracketing and wardrobing, and in general, eCommerce returns can lie in:
Sizing Apps: A variety of providers now offer sizing apps, the majority of which are simple plugins to add to your online store. They have been shown to reduce bracketing by up to 24 percent. Some of these apps now use smartphones to virtually size the shopper ahead of time, assisting them in finding the perfect fit the first time.
Accurate Product Shoot
Being as accurate in your product shoot, and shooting it in an appropriate setting can eliminate the element of guessing. The less your customer has to guess how your product will look on them, the lesser the return is going to be. This can be done by providing hi-res photos taken with the target audience in mind. Being as diverse with your photoshoot as possible, while targeting a particular set of people gives you the edge over your competitors, when aiming to reduce returns.
Quick note: In addition to high-quality photos and videos, include:
- Customer reviews under or next to the product
- A frequently asked questions section
- A social feed embedded, along with user-generated content.
These will help customers align their expectations with what they will receive.
Encourage Returns with In-store Credit: Returns are unavoidable. They are a part of online selling. However, offering customers in-store credit on returns can keep the money in-house after the purchase-return-purchase cycle. Even if a product is returned, you can ensure that fresh orders are placed guarantying that you receive future business.
Gain Lifetime Customers: Your return policy is an extension of your online store. You can win customers for life if you have the right policy. This includes being transparent, providing at least 30-days to return items, lowering or eliminating return fees, and streamlining the returns process with an automated product returns system.
Industry 4.0Industry 4.0 solutions like augmented reality when applied to e-commerce web design provides consumers with an immersive experience, allowing them to interact with products in real-time while remaining in their own environment. A.R. bridges the gap between physical stores and online shopping experiences for customers. The chasm has grown wider due to the Covid-19 pandemic, which has prevented retail stores from opening, preventing customers from entering stores and physically handling products.